AUD/USD – Rebounds After Strong Australian Consumer Sentiment

The AUD/USD has reversed direction and is moving higher. The pair was buoyed by a strong Australian Consumer Sentiment release, and is trading in the mid-0.95 range in Wednesday’s European session. In the US, there are several releases later today, including the Federal Budget Balance.

After dropping close to 3-year lows, the Australian dollar is showing some life, and has pushed higher against the US currency. The Aussie got a boost from strong domestic data, as Westpac Consumer Sentiment recorded a four-month high, with a strong gain of 4.7%. The indicator rebounded sharply from the previous reading of -7.0%. The Australian dollar has reacted positively to the solid release, and has gained about one cent since the start of the week. Will the upward momentum continue? The markets will get a look at some key data early on Thursday, with the release of Australian Employment Change and the Unemployment Rate.

Taking a look at the US, there was some good news from the S&P ratings agency on Monday, as the well-respected firm revised the US sovereign credit rating from negative to stable. This is an important vote of confidence in the US economy, and means that there is less than a 1 in 3 chance of another downgrade in the next two years. S&P noted that a key factor in its revision was the agreement reached in the US Congress which averted the fiscal cliff crisis, which would have led to $600 billion in automatic tax increases and spending cuts and could have pushed the fragile US economy into recession. In 2011, S&P cut the US credit rating from AAA to AA, and the threat of another downgrade has been a concern of the markets. This news will likely improve market sentiment and could give a boost to the US dollar.

The S&P decision could also affect the US Federal Reserve’s QE program, which involves the purchase of $85 billion in assets each month. The Fed has said that it won’t scale back the program before it sees a stronger economy and an improving employment picture. Although US releases continue to be mixed, speculation is rising that the Fed could take action in the next few months. Since QE is US dollar-negative, any tapering of QE could give a boost to the greenback and jolt the currency markets.

AUD/USD for Wednesday, June 12, 2013

AUD/USD June 12 at 12:30 GMT

AUD/USD 0.9528 H: 0.9564 L: 0.9416

AUD/USD Technical

AUD/USD has reversed direction and posted gains in the Wednesday session. On the upside, the pair faces resistance at 0.9541. This line was breached earlier today, and could see more activity. There is stronger resistance at 0.9651. On the downside, the pair is receiving support at 0.9405. This line has strengthened as the pair trades at higher levels. There is followed by a support level at 0.9328.

• Current range: 0.9405 to 0.9541

Further levels in both directions:

• Below: 0.9405, 0.9328, 0.9221, 0.9135 and 0.9071
• Above: 0.9541, o.9651, 0.9727 and 0.9795

OANDA’s Open Positions Ratio

AUD/USD ratio is back in action after showing no movement this week. The ratio is currently pointing to movement in the direction of short positions. This is not reflected in the current movement of the pair, as the Aussie has posted gains against the US currency. Long positions continue to make up most of the ratio, indicating that trader sentiment is strongly biased towards the Australian dollar continuing to improve.

The Australian dollar has managed to reverse direction, and has put together a nice rally. We could see some volatility on Thursday, with the release of key events in Australia and the US. 

AUD/USD Fundamentals

• 00:30 Australian Westpac Consumer Sentiment. Actual 4.2%.
• 14:30 US Crude Oil Inventories. Estimate -1.4M.
• 17:00 US 10-year Bond Auction.
• 18:00 US Federal Budget Balance. Estimate -110.2B.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.